Gold Mining Companies: Anglogold Ashanti posts a record third quarter profit

Gold Investment - 14 November 2011

Anglogold Ashanti Limited (ANG) shareholders have every reason to smile. The gold mining company has for one posted a record quarterly adjusted headline earnings of $457m or 118 U.S. cents per share in the third quarter (Q3) of 2011 (assuming a ZAR/USD exchange rate of R7.10/USD). In addition, prospects remain extremely positive for the company moving forward, especially considering the high demand for gold coming out of more than one quarter globally. This is despite growing considers over production and production costs.

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In addition to the above, Anglogold Ashanti  has managed to increase quarterly operating cash flow to a record $863m, managed to get net debt down with no less than 28% to $620m, and last but not least, they’ve managed to increase the Q3 dividend of 2011 to 90 South African cents. More good news is that Anglogold Ashanti shareholders can now expect to receive dividend payouts quarterly instead of bi-annually (or twice a year) as was previously the case. The Chief Executive Officer (CEO) of Anglogold Ashanti, Mark Cutifani, is of the opinion that their “…power to generate earnings and strong cash flow is clear…” in the numbers posted. In addition, he is of the opinion that the “…upward jump in the dividend demonstrates the fundamental strength of the business and the market, while maintaining the ability to fund our growth pipeline" (AngloGold Ashanti Q3 Profit at record $457m; raises dividend, AngloGold Ashanti website, 9 November 2011).  It seems that a strong demand for gold coming from China, India, investors and various central banks globally, is helping to a great extent to make the business fundamentally strong. This must be true considering that gold production has decreased slightly to stand at 1.092Moz, while the cash cost increased from $705/oz the previous quarter to $737/oz in the quarter that ended 30 September 2011. It is however encouraging to read that “…the company is implementing a new operating model to improve productivity across 20 mines and a portfolio of development projects” (AngloGold Ashanti Q3 Profit at record $457m; raises dividend, AngloGold Ashanti website, 9 November 2011).

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Given the above, word is out that water shortages and floods have mainly been responsible for the slight drop in production, although despite the challenges experienced in terms of production, Anglogold Ashanti  has still managed to post a record profit in the third quarter as mentioned above.

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